For an agency in the
On Thursday, the
The complaint rehashes some of the problems that emerged from Synapse's demise. Essentially,
"Synapse engaged in unfair acts or practices by failing to maintain adequate records of the location of consumers' funds and failing to ensure those records matched the records maintained by the Partner Banks," the CFPB's complaint states.
The Bureau alleges that Synapse violated the Consumer Financial Protection Act of 2010 by failing to maintain adequate records of the location of consumers' funds and failing to ensure those records matched the records maintained by its partnering banks, causing consumers to lose access to their funds.
The complaint does not exonerate the banks that worked with Synapse. It notes that, "at least as of September 2023, if not earlier, both Evolve and Synapse were aware that there was a deficit of tens of millions of dollars in funds that Evolve was holding for End Users, which included consumer funds. Evolve and Synapse have publicly blamed each other for the deficit." The dispute between the two companies has never been settled, it said.
"While the complaint suggests that action or inaction by the partner banks, particularly Evolve, may have had something to do with the losses, it adds nothing to our understanding about where the money actually went," Todd H. Baker, senior fellow at the Richman Center for Business, Law and Public Policy at Columbia Business and Law Schools, told American Banker.
Baker does not expect the CFPB to take action against Synapse's partner banks, though, given its staffing and budget issues. "It will leave bank enforcement to the primary regulators," he said.
In an order also filed on Thursday, the CFPB fined Synapse's estate $1. Charging Synapse this fine will allow the CFPB to use its Civil Penalty Fund to reimburse the Synapse end users who lost money, a move the agency
"The filing provides official regulatory validation of what consumers experienced — that Synapse's record-keeping failures caused substantial harm,"
However, this complaint could take months or years to resolve, she said. And "if funds are paid to consumers from the civil monetary fund, those distributions, especially with the severely limited staffing at the CFPB could also take years."
There's also a case to be made that the Trump administration's CFPB will move rapidly — it was only two months ago, after all, that it first signaled its plan to fine Synapse and give money from the Civil Penalty Fund to Synapse victims.
"I expect the CFPB will move as quickly as it can to verify claims and disburse money," Baker said.
Some victims have hope that the CFPB will help them, but also tempered expectations.
"This action by CFPB appears to be the only hope for restitution to those impacted by this regulatory failure," Jay Newbern, an Olympia, Washington resident who lost $158,696 he had deposited in a Juno account. "The FDIC has ignored our complaints, the Federal Reserve has not even acknowledged my petition for a declaratory ruling, and Michelle Bowman was confirmed as vice chair of supervision while skirting past Senator Warren's direct questions about how this happened."
But while the CFPB action is the best shot depositors have of getting their life savings back, "my optimism is restrained as national politics surround the CFPB and Civil Penalty Fund in uncertainty," he said.
